Finney v. Mary Guy

• Citation: 47 L.Ed. 839,23 S.Ct. 558,189 U.S. 335
• Decision Date: 06 April 1903
• Docket Number: No. 180,180
• Parties: A. C. FINNEY, as Receiver, et al., Plffs. in Err. , v. MARY A. GUY, etc
• Court: United States Supreme Court

189 U.S. 335

23 S.Ct. 558

47 L.Ed. 839

A. C. FINNEY, as Receiver, et al., Plffs. in Err.,

v MARY A. GUY, etc.

No. 180.

Argued February 27, March 2, 1903.

Decided April 6, 1903.

This action was commenced in the proper court of the state of Wisconsin to enforce the shareholders' liability under a Minnesota statute, in a corporation of Minnesota and doing business in that state. The defendant demurred to the complaint on the ground, among others, that it did not state facts sufficient to constitute a cause of action. The demurrer was overruled by the trial court and judgment given for the plaintiff, which was reversed by the supreme court of the state, and the case has been brought here by plaintiff to review the judgment of reversal.

The facts alleged in the complaint are in substance these: That during all the times therein mentioned the American Savings & Loan Association, one of the plaintiffs herein, was a corporation organized under the laws of the state of Minnesota, and on June 18, 1896, William D. Hale, another plaintiff in this action, was appointed receiver thereof; that the Farmers' & Merchants' State Bank was on June 6, 1888, a banking organization, by virtue of the laws of the state of Minnesota, and doing business as such; that the bank became insolvent in June, 1893, and the entire net proceeds of the bank's assets amounted to the sum of $12,539.95, all of which had been paid over to the state of Minnesota on account of the indebtedness of the bank to the state of over $28,000, which was a preferred claim under the laws of that state; that its other debts amounted to the sum of more than $100,000, and it had no property to satisfy the same; that the defendant, Mary A. Guy, a resident of the state of Wisconsin, was the owner of three shares of the capital stock of the bank in her own right, and that she owned sixteen shares of the stock of the bank as executrix of the will of her husband and as legatee thereunder.

It was then averred that suit had been commenced in Minnesota in 1894 to enforce the liability of the stockholders of the bank under and by virtue of the laws and Constitution of the state of Minnesota; that such suit had been commenced by the American Savings & Loan Association, which was a creditor of the bank, in behalf of itself and all other creditors who should come in and make themselves parties to the suit and prove their claims therein, and against all the stockholders of the bank; process was, however, not served on this defendant, but only on those residing within the state; that such proceedings were had in the suit that judgment was duly rendered therein on April 28, 1897, in favor of the complainant, the American Savings & Loan Association, for the amount of the indebtedness of the bank to it, and also in favor of the other creditors of the bank, who had duly intervened, for the various amounts due them from the bank. It was also adjudged that the amount of the debts of said bank aggregated the sum of $106,471.71.

It was then further averred in the complaint that Finney (one of the plaintiffs herein) was appointed receiver in the Minnesota suit for the purpose of collecting and enforcing the respective liabilities of the defendant stockholders, and that an order had been made authorizing and empowering him to proceed against those of the defendant shareholders residing in other jurisdictions in such other jurisdictions, for the purpose of enforcing the liabilities of such shareholders, and with full power and authority to distribute the proceeds of such action among the parties entitled thereto, after final payment in full, out of the proceeds, of the costs and expenses incurred, etc. It was then averred that, pursuant to the instructions of the Minnesota court, Finney, as receiver therein, commenced this action against Mary A. Guy, and joined with him as plaintiffs all the creditors of the bank who had proved their claims in the Minnesota suit, and it was also averred that Mrs. Guy was liable to the creditors of the bank in the sum of $3,800, double the amount of the par value of the three shares owned by her individually and of the sixteen shares formerly owned by her husband, and that she was the only stockholder who was a resident of Wisconsin, and therefore the only defendant in the case, and that the full amount of her double liability, if recovered, would be wholly insufficient to pay the indebtedness of the bank after applying everything that could be collected from all the other stockholders, some of whom were insolvent, some had been compromised with, and from others nothing could be collected.

The complaint then set forth several sections of the General Statutes of the State of Minnesota of 1878, among them being §§ 5905-5907 and 5911, and it was averred that this action could be maintained by reason of such sections. They are the same as are set forth in Hale v. Allison, 188 U. S. 56, ante, 244, 23 Sup. Ct. Rep. 244. It was then averred that decisions in the courts of the state of Minnesota had been rendered relating to the liability of stockholders under those statutes, in corporations organized under the laws of that state, as to the proper method of enforcing such liability. The complaint then referred to some twenty different decisions in the state courts of Minnesota by titles, and gave a reference to the volumes in which they were reported, and it then stated what the law of Minnesota was under those decisions and statutes as to the liability of stockholders and the manner in which that liability could be enforced, and the effect of a judgment recovered in a state court by a creditor in his own behalf and in behalf of all others similarly situated, and it averred that a judgment such as was obtained in the Minnesota suit was conclusive upon stockholders, even though they were not parties thereto, as to all questions of indebtedness of the bank and who were its creditors, and that defendant, though not served with process in that suit, was concluded by the judgment as to her liability as shareholder, except as therein stated. It also averred that, after such a judgment had been obtained, the Minnesota decisions held that under those statutes a suit could be maintained in the courts of another jurisdiction, similar to the one before us, and the complaint ended with a prayer for judgment that the defendant should pay the plaintiff the sum of $3,800, with interest thereon since April 28, 1897, and that A. C. Finney, one of the plaintiffs, be appointed receiver herein, to collect the amount and distribute the same pro rata among the other plaintiffs.

Messrs. Frederick W. Reed, Fred G. Coldren, and W. E. Hale for plaintiffs in error.

Mr.R. M. Bashford for defendant in error.

Mr. Justice Peckham, after making the foregoing statement of facts, delivered the opinion of the court:

The demurrer raises the question whether the complaint states facts sufficient to constitute a cause of action. The plaintiffs contend that their cause of action is based upon the decisions and judgments of the courts of the state of Minnesota, and upon the statutes of that state, and that the Wisconsin supreme court, in sustaining the demurrer, has thereby failed to give that full faith and credit to the laws and judgments of the state of Minnesota and its courts which they receive in that state and which they are entitled to under the Constitution and laws of the United States, and that by reason thereof a Federal right has been denied them.

They urge that, under the judgment of the American Sav. & L. Asso. v. Farmers' & M. State Bank, which was recovered in the Minnesota court, and is referred to in the foregoing statement of facts, the defendant is concluded as to her defense to the same extent she would have been had she appeared and contested her liability in the Minnesota courts, and that, as a consequence, the Wisconsin courts are bound to give the same effect to that judgment in their courts that it has in the courts of Minnesota; that if such effect had been awarded that judgment, then this action could have been maintained; and the Wisconsin court, in sustaining the demurrer, denied such effect to the judgment, which was a violation of a right founded upon the Federal Constitution.

It is stated by the supreme court of Wisconsin that that state for many years has had a statute for the enforcement of the liability of stockholders in corporations similar to that which exists in Minnesota, and that it had been frequently decided under such statute that an action of the nature of the one at bar could not be maintained in her courts, and also that it was against the public policy of Wisconsin to permit it; that the remedy under the Wisconsin statute was exclusive, and consisted in a suit in equity at the home of the corporation, in the nature of a partnership accounting, the parties to which would be all the creditors or a creditor in his own behalf and in behalf of all others similarly situated who would come in and make themselves parties, and the stockholders who could be served with process in the state.

Whether a cause of action is stated in a pleading is generally to be decided with reference to the law of the state where the action is pending. If the state court hold that no cause of action is set forth in the pleading, and that it is against the public policy of the state to permit an action for such a purpose, we should generally hold that there was no Federal question involved in such determination. The plaintiffs, however, urge that there is here an exception to that rule, founded upon the considerations just stated, and that if under the Minnesota law this action could be maintained, the courts of Wisconsin are bound to entertain jurisdiction to the same extent. It...